1 FINANCING, COVERAGE, AND COSTS OF HEALTH CARESuggestions for Lecturer -1-hour lecture -Use GRS slides alone or to supplement your own teaching materials. -Refer to GRS for further content. -Supplement your lecture with handouts, such as the tables and figure in the GRS chapter. -See GRS7 questions 5, 15, 24, 93, 99 and 253 for case vignettes on health care finance issues. Topic

2 OBJECTIVES Know and understand: What Medicare coversAdditional options for coverage of health care expense for older Americans How fee-for-service (FFS) and Medicare Advantage benefits compare in different settings Topic

3 TOPICS COVERED Coverage Options: Medicare, Medicaid, Medigap Insurance, Medicare Advantage Inpatient Care Postacute Rehabilitation Home Health Care Nursing-Home Care Hospice Care Changes in Federal Financing of Health Care Topic

4 MEDICARE BASICS Federal insurance program run by the Centers for Medicare and Medicaid Services (CMS) Pays for acute health care provided to Americans who are ages 65+, disabled, or suffering from end- stage renal disease As originally enacted, comprises 2 FFS plans (Parts A and B), each of which pays predetermined amounts for specified health-related goods and services >80% of older Americans are covered by both parts Topic

5 COMPONENTS OF MEDICARE2009 HAL POA COMPONENTS OF MEDICARE Medicare Ref 19 CMS 2009 / p12 para 3-6 Hospital services Skilled nursing facilities Home healthcare Hospice care Part A Hospital Coverage Physician Outpatient Home healthcare Preventive services Part B Supplemental Insurance Enrolled beneficiaries receive Part A and Part B services Some plans have a drug benefit Part C Medicare Advantage Self- administered drugs are covered under Part D Part D Prescription Drug Benefit SOURCE: Centers for Medicare & Medicaid Services. Medicare and You Accessed February 24, 2009. Medicare comprises the following components: Part A helps pay for inpatient hospital stays and also helps cover skilled nursing care, home healthcare, and hospice care Part B helps cover medically necessary services such as physician visits and outpatient care. Part B also covers some preventive services, including screening tests and shots, diagnostic tests, some therapies (prescription drugs), and durable medical equipment like wheelchairs and walkers Part C is referred to as a Medicare Advantage (MA) plan. It combines Parts A and B, and sometimes Part D (prescription drug coverage). MA plans are managed by private insurance companies approved by Medicare. These plans must cover medically necessary services. However, plans can charge different co-payments, co-insurance, or deductibles for these services Part D is Medicare drug coverage that helps pay for outpatient prescription drugs 5

6 MEDICARE BENEFIT PAYMENTSPart A Part B Part D Part A and B 4% 6% 4% 5% 28% 19% 5% SOURCE: Congressional Budget Office, Medicare Baseline, March 2009. The total on this pie chart does not include $2.5 billion in administrative expenses such as spending for implementation of the Medicare drug benefit and the Medicare Advantage program. The total is net of $9.4 billion in recoveries for 2009. The four parts of Medicare now total nearly $500 billion. Inpatient hospital care accounts for the largest share, consuming about a quarter of all Medicare dollars. Physicians account for 19%. Note that payments to Medicare advantage plans are now nearly a quarter of total benefit payments. Also note the Medicare drug benefit that went into effect in 2006, now accounts for about a tenth of Medicare benefit spending. 23% 4% Total Benefit Payments = $484 billion in 2009 6

7 MEDICARE PART A Coverage Eligibility CostHospital, skilled nursing home, home-health and hospice services Eligibility Older Americans and their spouses who have had Medicare taxes deducted from their paychecks for at least 10 years are entitled to Part A coverage without paying premiums Others may be able to purchase Part A coverage for up to $461 per month (2010), depending on how long Medicare taxes were paid Cost Deductible for Part A ($1100 per benefit period, ie, the first 60 days following an admission) (2010)

8 MEDICARE PART B (1 of 2) CoveragePhysicians, nurse practitioners, social workers, psychologists, therapists, laboratory tests, and durable medical equipment Eligibility At age 65, people become eligible for Part B coverage if: They are entitled to Part A coverage, or They are citizens or permanent residents of the United States

9 MEDICARE PART B (2 of 2) CostMonthly premiums for Part B ($96–354) (2010) Annual deductible for Part B ($155) (2010) Co-insurance payments (20%) for goods and services for which Medicare or other insurance pays only a portion

10 MEDICARE PART C CoverageProvides the benefits offered under Medicare Parts A, B, and D through Medicare Advantage plans, which are managed care plans Eligibility Entitled to Medicare Parts A/B Cost Premiums and out-of-pocket expenses are determined by plan but can not exceed those which would apply under Medicare FFS

11 MEDICARE ADVANTAGE PLANS (1 of 3)Medicare Health Maintenance Organizations (HMOs)—insurance companies that accept capitation payments from CMS and provide or purchase Medicare-covered health services Preferred provider organizations (PPOs)—alliances of providers that accept capitation payments and deliver Medicare-covered health services to their enrolled patients As an alternative to traditional FFS Parts A and B, Medicare beneficiaries can instead elect to enroll in a Medicare managed care plan, an option known as Part C or Medicare Advantage. These plans, operated by private insurers, hold contracts with CMS specifying that, for each Medicare beneficiary they enroll, they will provide at least the standard Medicare benefits in return for fixed monthly capitation payments. In order to attract enrollees, most Medicare Advantage plans also cover additional benefits and charge low or no premiums, deductibles, and co-payment. The plans achieve cost savings by managing their enrollees’ use of services within their networks of providers, with whom they negotiate price discounts in return for patient volume. Each January, Medicare Advantage plans have the option of changing their premiums, benefits, and provider networks—or of discontinuing their plans altogether. Slide 11 Topic Slide 11

12 MEDICARE ADVANTAGE PLANS (2 of 3)Provider-sponsored organizations (PSOs)—partnerships of physician groups and hospitals that accept capitation payments and deliver Medicare-covered health services to their enrolled patients Private FFS plans—may charge beneficiaries a premium, pay providers more liberally than the original Medicare FFS program does, and allow physicians to charge their patients co-payments of 15% Each November, beneficiaries covered by Medicare Part A and Part B have the option of joining any Medicare Advantage plan operating in their area; they cannot be denied enrollment because of any health problems except end-stage renal disease. Enrollees must continue to pay their monthly Medicare Part B premiums, and they must obtain their health care from the plan’s provider network. They have the option of leaving the plan at any time and going back to the FFS Medicare program. Slide 12 Topic Slide 12

13 MEDICARE ADVANTAGE PLANS (3 of 3)Special needs plans—designed for patients with certain chronic diseases or other special needs Medical savings accounts (MSAs): Make tax-deductible contributions Withdraw funds to purchase routine health-related goods (including medications) and services (including long-term-care insurance) from any Medicare provider Linked to the MSA is a catastrophic insurance policy that limits the individual beneficiary’s out-of-pocket expenses for health care to $6000 per year. Slide 13 Topic Slide 13

14 MEDICARE PART D (1 of 2) CoverageCovers some of the cost of prescription medications Eligibility Entitled to Medicare Parts A/B Cost $310 maximum allowable deductible by law in 2010

15 MEDICARE PART D (2 of 2) Cost (continued)After deductible, Part D plans usually cover 75% of drug costs up to a specified amount ($2830 in 2010) Frequently, there is no coverage for drug costs exceeding this amount (the “doughnut hole”) up to a specified maximum ($6440 in 2010, corresponding to out-of-pocket drug costs of $4550) Costs above this maximum are typically covered at 95% by Part D plans Starting June 1, 2010 those beneficiaries falling into the “doughnut hole” will receive a $250 rebate check

16 On notes page, link in ref 2 no longer worksOn notes page, link in ref 2 no longer works. Also, can notes be edited so that font size can be increased? MEDICARE PART D Part D Standard Benefit Parameters 2009 2010 Premium Varies Deductible $295 $310 Initial coverage limit $2700  $2830 OOP threshold $4350  $4550 Minimum cost-sharing for generic/preferred multisource drugs in the catastrophic phase $2.40 $2.50 Minimum cost-sharing for other drugs in the catastrophic phase $6.00 $6.20 As a reminder, beneficiaries may receive Medicare drug coverage through Medicare PDPs, or through an MA or other Medicare plan, if they are enrolled in one. Some employers and unions may provide their retirees with Medicare prescription drug coverage through employer/union group plans. Medigap policies with prescription drug coverage are not Medicare drug plans.1 During 2009, Part D PDP beneficiaries will pay a monthly premium, which is different for different plans.2 Some plans have lower premiums which others have higher premiums but might cover more. The average national monthly premium in 2009 is about $45.45 with amount ranging from $10.30 to $ The table on this slide provides an overview of 2009 and 2010 benefit parameters for Part D plans. 2,4 Formularies for all Part D plans are required to include all or substantially all drugs from 6 classes of medications: antidepressants, antipsychotics, immunosuppressants (for organ transplant patients), antiretrovirals, and antineoplastics (only chemotherapy drugs not covered under Part B).5 References Centers for Medicare & Medicaid Services. National Medicare Training Program. Medicare 101. Training Workbook. Revised April Accessed February 19, 2009. Centers for Medicare & Medicaid Services. Fact Sheets. apps/media/press/factsheet.asp?Counter=3034&intNumPerPage=10&checkDate=&checkKey=&srchType=1&numDays=3500&srchOpt=0&srchData=&keywordType=All&chkNewsType=6&intPage=&showAll=&pYear=&year=&desc=false&cboOrder=date. Accessed February 19, 2009. Kaiser Family Foundation. Accessed February 19, 2009. What is the outlook for Medicare Part D 2010? Q1 Medicare Website. Accessed March 18, 2009. Centers for Medicare & Medicaid Services. Press release. CMS announces course of action to identify protected classes of prescription drugs. Accessed May 18, 2009. 16

17 MEDIGAP Coverage Supplemental insurance plans cover Medicare Part A and Part B deductibles and co-insurance costs, as well as preventive care and other health-related goods and services Eligibility Enrolled in Medicare Part B Cost Private companies offer FFS “Medigap” plans of 12 types (A to L), classified according to the benefits covered with premiums varying between plan type and geography

18 MEDICAID (1 of 2) CoverageSimilar to Medicare Part A, B, and D with additional benefits as determined by each state Eligibility Based on limited income and savings as determined on a state basis

19 MEDICAID (2 of 2) Cost Most programs pay Part B premiums, and some pay Medicare deductibles and co-insurance Pays for long-term custodial care in nursing homes for those who qualify Several states offer fixed capitation payments to managed care organizations that provide Medicaid and Medicare benefits to “dually eligible” residents

20 HEALTH CARE FUNDING Employers Individual AmericansRetirement program trusts Out-of-pocket premiums Federal payroll taxes Federal income taxes State taxes Trust fund (A) Trust fund (B) Medicare Part A intermediary Medicare Part B carrier Long-term care insurance “Medigap” and Medicare Part D prescription drug insurance In 1965 the U.S. government passed legislation designed to improve access to acute health care for people who are old, disabled, or poor. During the decades that followed, the resulting Medicare and Medicaid programs expanded, evolved, and spawned thousands of supplemental commercial insurance plans. Today, a complex and often confusing array of personal payments, public programs, and private insurance plans pays for and thereby determines much of the health care that older Americans receive. State Medicaid programs Managed care organizations Health care providers Topic

21 HEALTH INSURANCE COMPARISON (1 of 3)FFS Medicare Supplemental Coverage Medicare Advantage Plan b (Part C) Part A Part B Medicaid a Part D Medigap Policy Covers the cost of: Hospitals 100% c — $912 100% Post-acute care in SNF 100% d Hospice 100% e Medically necessary home care Durable medical equipment 80% f 20% Diagnostic laboratory tests Diagnostic imaging tests 80% NOTE: SNF = skilled nursing facility a Under the Balanced Budget Act of 1997, state Medicaid programs were given the option whether or not to pay deductibles and co-insurance costs. b Some Medicare Advantage plans require members to pay deductibles and co-payment. c After the beneficiary or secondary insurer pays the deductible amount ($1024) d For the first 20 days of SNF care following a hospital stay of at least 3 days e Patient makes co-payment of $5.00 per outpatient prescription and 5% of cost of respite care. f When patient is receiving Medicare-covered home care Topic

22 HEALTH INSURANCE COMPARISON (2 of 3)FFS Medicare Supplemental Coverage Medicare Advantage Plan b (Part C) Part A Part B Medicaid a Part D Medigap Policy Covers the cost of: Physicians, nurse practitioners — 80% 20% 100% Outpatient PT, OT, ST Outpatient services, supplies Emergency care Ambulance services Preventive services 100%g 100%g, h Outpatient mental health care 50% OT = occupational therapy; PT = physical therapy; ST = speech therapy. a Under the Balanced Budget Act of 1997, state Medicaid programs were given the option whether or not to pay deductibles and co-insurance costs. b Some Medicare Advantage plans require members to pay deductibles and co-payments. g 100% of allowed cost of fecal occult blood test, Pap smear interpretation, prostate-specific antigen test, blood tests for diabetes and cardiovascular disease, influenza and pneumococcal vaccinations; as well as 100% of allowed cost of mammograms and clinical examination of breast and pelvis (no deductible applies), glaucoma screening, sigmoidoscopy or colonoscopy or barium enema, digital examination of rectum (men), measurement of bone mass, hepatitis B vaccination, and diabetic education and equipment as a result of Healthcare Reform legislation of 2010 h Some Medicare Advantage plans cover additional preventive services. Topic

23 HEALTH INSURANCE COMPARISON (3 of 3)FFS Medicare Supplemental Coverage Medicare Advantage Plan b (Part C) Part A Part B Medicaid a Part D Medigap Policy Covers the cost of: Custodial care in nursing home — 100% Hearing, vision services i Outpatient medications 75%l Additional costs to patient: Deductibles $1024 j $135k $285 Monthly premiums $96–238 $25–35 a Under the Balanced Budget Act of 1997, state Medicaid programs were given the option whether or not to pay deductibles and co-insurance costs. b Some Medicare Advantage plans require members to pay deductibles and co-payments. i Benefits and costs vary widely among Medigap insurance plans, state Medicaid plans, prescription drug plans, and Medicare Advantage plans. j Per benefit period (first 60 days following hospital admission) k Annual l Beneficiary pays 25% co-payments and then 100% of cost after annual drug cost exceeds $2,510 (the “coverage gap” or “doughnut hole”), up to total annual drug costs of $5726. Beneficiary pays 5% co-payments for annual drug costs exceeding this amount. Topic

24 ADVANTAGES & DISADVANTAGESType Primary Advantages Primary Disadvantages FFS Medicare (Parts A, B, and D) Traditional Medicare benefits, choice of any provider that participates in the Medicare program, partial coverage for prescription medications Cost of co-insurance, deductibles, non-covered goods and services (eg, eyeglasses, hearing aids) Medicaid Coverage of co-insurance, deductibles, and some benefits* not covered by Medicare Choice of providers restricted to a single network in some states Medigap insurance Coverage of co-insurance, deductibles, and some benefits** not covered by Medicare Out-of-pocket monthly premiums may be expensive, depending on the coverage provided Medicare Advantage plan (ie, Part C) Traditional Medicare benefits plus coverage of additional goods and services** Choice of providers restricted to a network; potential for changes in premiums, co-payments, deductibles, benefits, and providers at the discretion of the plan * Benefits vary from state to state. ** Benefits vary from plan to plan. Topic

25 HOW MEDICARE ADVANTAGE PLANS PAY PROVIDERSType of Medicare Advantage Plan Staff Model Group Model IPA Model Providers Employees One large group practice Many small independent practices Method of payments Salary FFS or capitation* IPA = independent practice association Regardless of the payment mechanism, the crucial question is whether the amount of payment suffices to support high-quality care. For example, if capitation rates are below the aggregate cost of the services they are intended to cover, the provider will feel pressure to take on more patients and limit the amount of service that each patient receives. Similarly, if FFS amounts are too small, the provider will feel pressure to schedule more visits and procedures and to reduce the time devoted to each patient. Each provider should, therefore, monitor carefully and continuously the many changing elements in the practice environment (eg, payment schedules, covered services, expenses, patients’ and families’ expectations, population demographics) to help determine the numbers and types of services that are appropriate for each older patient. * The services covered by the capitation payments range from “primary care only” in some plans to “medications and all acute care” in others Topic

26 PHYSICIAN PARTICIPATIONPhysicians must choose among three options for participating in the FFS Medicare program: Participation Non-participation Private contracting <1% “opt out” of Medicare and enter into “private contracts” (aka “concierge practice”) with older patients Applies to all their patients; no case-by-case basis Medicare carriers (and Medigap insurance plans) pay nothing, and patients pay physicians the full amount Private contracts must meet specific requirements: The physician must sign and file an affidavit agreeing to forego receiving any payment from Medicare for items or services provided to any Medicare beneficiary for the following 2-year period. Medicare does not pay for the services provided or contracted for. The contract must be in writing and must be signed by the beneficiary before any item or service is provided. The contract cannot be entered into at a time when the beneficiary is facing an emergency or an urgent health situation. In addition, the contract must state unambiguously that by signing the private contract, the beneficiary: Gives up all Medicare payment for services furnished by the “opt out” physician. Agrees not to bill Medicare or ask the physician to bill Medicare. Is liable for all of the physician’s charges, without any Medicare balance billing limits. Acknowledges that Medigap or any other supplemental insurance will not pay toward the services. Acknowledges that he or she has the right to receive services from physicians for whom Medicare coverage and payment would be available. To opt out, a physician must file an affidavit that meets the above criteria and is received by the carrier at least 30 days before the first day of the next calendar quarter. There is a 90-day period after the effective date of the first opt-out affidavit during which physicians may revoke the opt-out and return to Medicare. Once physicians have opted out of Medicare, however, they cannot submit claims to Medicare for any of their patients for a 2-year period. Slide 26 Topic Slide 26

27 PARTICIPATING PROVIDERFor each FFS Medicare-covered service: Submit a claim to the Part B carrier Accept Medicare’s fee (80% of pre-established “allowed” amount) Bill the patient or secondary insurer for no more than 20% of allowed amount For services not covered by Medicare: May bill the patient if the patient agreed in advance in writing Slide 27 Topic Slide 27

28 A HYPOTHETICAL CASE: MRS MURAT79-year-old retired schoolteacher who lives with her 83-year-old husband in a small older home Hypertension, CAD, mild heart failure Takes hydrochlorothiazide, metoprolol, lisinopril, nitroglycerin Covered by traditional Medicare Parts A and B Purchased Part D drug plan—annual premiums ($383), deductibles ($310), and co-insurance (25% of remaining medication expenses = $298) Total out-of-pocket medication costs were reduced 34% from $1500 to $991 per year (2010) Through the use of a hypothetical case, the next series of slides compares FFS financing and managed care at different sites: outpatient, in-patient, postacute rehabilitation, home health care, nursing home, and hospice. Topic

29 OPTIONS FOR OUTPATIENT CARE Managed CareRecommendations influenced by plan attributes: If the PCP is not in the Medicare Advantage plan’s service network, Mrs Murat’s enrollment in the plan would require her to select a new PCP If the PCP is in the plan’s network, her enrollment might change (ie, probably reduce) the payment for her care At the end of her quarterly office visit, Mrs Murat asks for advice on joining a managed care organization that has been marketing a Medicare Advantage plan in her county. She is impressed by the plan’s offer of free eyeglasses, hearing aids, and preventive check-ups, all of which she has purchased out-of-pocket in the past. Her options are: staying with traditional FFS Medicare as her only coverage; keeping FFS Medicare and applying for either Medicaid or supplemental (Medigap) coverage; or exchanging her FFS Medicare coverage for membership in the Medicare Advantage plan. If it is a group or IPA model, the Medicare Advantage plan may pay providers “discounted FFS,” that is, possibly less than Medicare Part B would pay for each service. Or it may pay primary providers a fixed capitation amount each month to cover specified services. If these services are limited to primary ambulatory care, the capitation amount will be relatively small. The plan may reward primary providers with end-of-the-year bonus payments if they have limited their referrals to specialists and their admissions to hospitals. If the covered services also include specialty and inpatient care, the capitation amounts will be considerably larger, and the provider will have incentives to use these services judiciously because he or she will have to pay for them, at least in part. Depending on the Murats’ income, savings, and state of residence, they may also qualify for a Medicare assistance program that pays for some combination of their Medicare premiums, deductibles, and co-insurance costs. Some older Americans may have additional health insurance options through the federal Department of Veterans Affairs or through their (or their spouse’s) present or previous employer or union. Topic

30 OPTIONS FOR OUTPATIENT CARE Medicare Personal Plan FinderContains data about the quality of care and the satisfaction of other enrollees in all the local Medicare Advantage plans Information from Medicare’s information line or from the Medicare Personal Plan Finder would help Mrs Murat compare the prices and coverage of the Medigap policies available in her area Topic

31 COVERAGE FOR INPATIENT CARE The Hypothetical Case, ContinuedFour months later, Mrs Murat awakes: Dysarthric Unable to feel her left hand Her face is asymmetric Her left arm and left leg are weak She is rushed to the nearest ED Physician on duty diagnoses a right hemispheric stroke and admits her to the hospital Topic

32 PAYMENTS FOR INPATIENT CARE Fee for ServiceMedicare’s required deductibles: In 2010, $155 per year under Part B for the ambulance and the emergency medical care $1100 under Part A for the hospital admission Co-insurance amounts (20% of Medicare’s allowed charges by physicians and the ambulance service) Any ambulance charges in excess of Medicare’s approved fee This slide illustrates the scenario in which Mrs Murat retained traditional Medicare as her only health insurance. If she had supplemented her Medicare coverage, her Medicaid or private Medigap coverage would cover some of these deductibles and co-insurance payments. She would not be transferred to another hospital for insurance reasons. The hospital would submit its claim for emergency and inpatient care, which would be based on the diagnosis-related group (DRG) of her discharge diagnosis, to Medicare’s Part A regional intermediary insurance company. The involved physicians and the ambulance service would submit their E&M coded claims to Medicare’s Part B regional insurance carrier. The intermediary and the carrier would pay their shares of these costs and, if Mrs Murat had supplemental coverage, they would forward requests for payment of the balances to the state Medicaid program or her Medigap insurance company. Ultimately, CMS would reimburse the intermediary from the Medicare Part A Trust Fund and the carrier from the Medicare Part B Trust Fund. Topic

33 PAYMENTS FOR INPATIENT CARE Managed CarePlan would pay for the ambulance, emergency, and physician services If the admitting hospital had no contract with her Medicare Advantage plan, Mrs Murat would probably be transferred to a hospital in the plan’s network as soon as she was medically stable Depending on the plan’s benefit package, she might be responsible for co-payment and deductibles for some of these services This slide shows Mrs Murat’s out-of-pocket costs if she had joined the Medicare Advantage plan. In most cases, it would pay the hospital a pre-negotiated lump sum or a per diem fee to cover all of her inpatient care. The amount of this lump sum would be determined by the DRG of her discharge diagnosis, in this case stroke. Topic

34 POSTACUTE REHABILATION The Hypothetical Case, ContinuedAfter 4 days of stabilization, evaluation, and rehabilitation, Mrs Murat is stable enough for hospital discharge Has improved somewhat, but is still mildly hemiparetic and dysarthric, and she is apathetic and easily fatigued The consulting neurologist advises her and her husband that her progress during the next few weeks will determine her potential for functional recovery Mr Murat asks the neurologist to recommend a rehabilitation facility for his wife Because Mrs Murat’s days in the hospital are fewer than the average number of hospital days associated with the DRG of her discharge diagnosis (ie, 5.9 days), and because her discharge diagnosis is one of those listed in the table on the next slides, CMS regards her “early” discharge as a “transfer.” This permits CMS to reduce the amount it pays the hospital for her care. Topic

35 WHICH “EARLY” DISCHARGES ARE REGARDED AS TRANSFERS? (1 of 4)Primary Diagnosis DRG # Hospital Days, National Average Degenerative nervous system disorders 12 8.1 Specific cerebrovascular disorders, except transient ischemic attack 14 5.9 Seizure and headache with complications and comorbidities 24 5.0 Seizure and headache without complications and comorbidities 25 3.2 Chronic obstructive pulmonary disease 88 5.1 Simple pneumonia and pleurisy with complications and comorbidities 89 6.0 Simple pneumonia and pleurisy without complications and comorbidities 90 4.1 Amputation for circulatory system disorders, except upper limb and toe 113 12.3 Circulatory disorders with acute myocardial infarction and major complications, discharged alive 121 6.4 Topic

36 WHICH “EARLY” DISCHARGES ARE REGARDED AS TRANSFERS? (2 of 4)Primary Diagnosis DRG # Hospital Days, National Average Circulatory disorders with acute myocardial infarction without major complications, discharged alive 122 3.7 Heart failure and shock 127 5.3 Peripheral vascular disorders with complications and comorbidities 130 5.7 Peripheral vascular disorders without complications and comorbidities 131 4.2 Major joint and limb reattachment procedures for lower extremity 209 5.1 Hip and femur procedures except major joint with complications and comorbidities 210 6.8 Hip and femur procedures except major joint without complications and comorbidities 211 4.9 Topic

37 WHICH “EARLY” DISCHARGES ARE REGARDED AS TRANSFERS? (3 of 4)Primary Diagnosis DRG # Hospital Days, National Average Fractures of hip and pelvis 236 5.2 Pathological fractures and musculoskeletal and connective tissue malignancy 239 6.3 Cellulitis with complications and comorbidities 277 5.7 Cellulitis without complications and comorbidities 278 4.3 Diabetes mellitus 294 4.6 Nutritional and miscellaneous metabolic disorders with complications and comorbidities 296 Nutritional and miscellaneous metabolic disorders without complications and comorbidities 297 3.4 Topic

38 WHICH “EARLY” DISCHARGES ARE REGARDED AS TRANSFERS? (4 of 4)Primary Diagnosis DRG # Hospital Days, National Average Kidney and urinary tract infections with complications and comorbidities 320 5.3 Kidney and urinary tract infections without complications and comorbidities 321 3.8 Red blood cell disorders 395 4.4 Organic disturbances and mental retardation 429 10.0 Extensive operating room procedure unrelated to principal diagnosis 468 13.0 Tracheostomy for face, mouth, and neck diagnoses 483 39.6 Topic

39 POSTACUTE REHABILATION Fee for ServiceMedicare Part A would pay for 20 days of postacute rehabilitation, in either a rehabilitation facility or a transitional (postacute) care unit of a nursing home Medicare Part B would pay 80% of the allowed charges for the postacute medical care provided by Mrs Murat’s physician Out-of-pocket: Part B’s $155 annual deductible and 20% co-insurance payments for the physician’s care Upon Mrs Murat’s admission to either type of postacute care unit, rehabilitation professionals would evaluate her functional status, establish a plan for her care, and certify her as needing one of 26 levels of intensity of care according to the resource utilization group system (RUGS). Her RUGS category would determine the daily rate that Medicare Part A would pay the facility for the first 2 weeks of her care, as long as she was demonstrating progress in rehabilitation. After 2 weeks, a nurse would reevaluate her status, update her plan of care, and adjust her RUGS category and thereby adjust Medicare’s payments to the facility for the next 2 weeks. Under this prospective payment system, the facility would be responsible for Mrs Murat’s nursing, rehabilitative, and social services, as well as the costs of her medications, laboratory tests, and visits to an emergency department not resulting in admission to the hospital. Any postacute care related to an inpatient surgical procedure would be the responsibility of the surgeon, who would receive a “global fee” to cover the surgery and all postoperative surgical care. The Murats’ out-of-pocket expenses would be reduced or eliminated by any Medicare supplements in effect, such as Medicaid, Medigap, or long-term-care coverage. Topic

40 POSTACUTE REHABILATION Managed CareThe Medicare Advantage plan would include postacute rehabilitative care Probably at a nursing home in the plan’s provider network rather than at a rehabilitation facility The plan would also cover the physician’s postacute services The Murats may be responsible for a deductible and co-payment If Mrs Murat had joined the Medicare Advantage plan, her insurance coverage would include postacute rehabilitative care, probably at a nursing home in the plan’s provider network rather than at a rehabilitation facility. Some nursing homes concentrate such high-acuity patients in transitional (or postacute) care units and provide them with coordinated rehabilitative (physical, occupational, and speech), social, and nursing services. Most homes, lacking such units, offer only custodial care supplemented by rehabilitative services as needed. The Medicare Advantage plan would also cover the physician’s postacute services, but the Murats may be responsible for a deductible and co-payments. Topic

41 POSTACUTE REHABILATION Long-term Care InsuranceMore than 3 million Americans have such insurance These policies pay for less than 2% of all nursing-home care The growth of this insurance sector has been limited by high premiums, consumers’ uncertainty about needing long-term care in the future, and their doubts about the policies’ ability to cover costs in the future Many middle-aged Americans believe they will retain good health and independence into old age. They appear to be relying on a combination of good fortune, social insurance (ie, Medicaid), and their personal assets to see them through their later years. More information about long-term care insurance is available in “Choosing Long- Term Care: A Guide for People with Medicare” (CMS Publication No ) and “A Shopper's Guide to Long-Term Care Insurance” (available from state insurance departments or the National Association of Insurance Commissioners, McGee St., Suite 800, Kansas City, MO ). Topic

42 HOME HEALTH CARE The Hypothetical Case, ContinuedDuring the first 10 days of rehab, Mrs Murat regains the ability to speak, and her left arm becomes stronger After 18 days, she is still unable to walk, cook, bathe, or dress herself without help Due to her lack of continued progress, she is probably ineligible for additional rehabilitative services in either an HMO or FFS Medicare She will need to choose between a home health agency and a custodial nursing home To obtain long-term care for Mrs Murat’s functional deficits, she and her husband will need to choose between a home-health agency and a custodial nursing home. If she returns home, neither the FFS Medicare program nor the Medicare Advantage plan will be likely to pay for a home-health aide unless she is homebound and requires the services of a registered nurse or rehabilitation therapist. Local community agencies, however, may be able to offer assistance. The Murats’ choice of a home-health agency could be informed by comparisons of their local agencies’ recent clinical performance, available at s Topic

43 HOME HEALTH CARE Fee for ServiceIf Mrs Murat is homebound and dependent on skilled professional services: Medicare Part A would pay any Medicare-certified home-health agency a fixed fee to provide her with the services and equipment necessary to treat her primary diagnosis Medicare Part B would pay her primary care physician 80% of the allowed charges for house calls, office visits, and care plan oversight services Medicare Part B will pay her physician for home-health certifications and recertifications The Murats would be responsible for the annual Part B annual deductible ($135) and the 20% co-insurance payments, unless they had supplemental coverage through Medicaid, a Medigap policy, or a long-term-care policy. If Mrs Murat’s condition made her homebound and dependent on skilled professional services, her Medicare Advantage plan probably would pay a home-health agency a fixed fee to provide her with the services and equipment necessary to treat her primary diagnosis. The plan would also provide her with the services of a primary care physician. If a health care organization in the area had contracted with CMS and the state Medicaid agency to create a Program for All-inclusive Care of the Elderly (PACE), it could provide community-based long-term care for “dually eligibles” (people eligible for both Medicare and Medicaid) whose disabilities qualified them for custodial care in a nursing home. If Mrs Murat were eligible for Medicaid and she enrolled in PACE, she would attend an adult day health care center several days each week and receive comprehensive outpatient, inpatient, acute, and long-term care from a salaried interdisciplinary team composed of a physician, a nurse, a social worker, rehabilitation therapists, and other members of the PACE staff. Topic

44 BALANCED BUDGET ACT OF 1997 Intended to limit future growth in the cost of the Medicare program Authorized 5 types of “Medicare Plus Choice” (renamed “Medicare Advantage”) plans Medicare HMOs Preferred provider organizations (PPOs) Provider-sponsored organizations (PSOs) Private FFS plans Medical savings accounts (MSAs) Medicare HMOs (IPA, group, or staff model) are insurance companies that accept capitation payments from CMS and provide or purchase Medicare-covered health services. Preferred provider organizations are alliances of providers that accept capitation payments and deliver Medicare-covered health services to their enrolled patients. Provider-sponsored organizations are partnerships of physician groups and hospitals that accept capitation payments and deliver Medicare-covered health services to their enrolled patients. Private FFS plans are plans that may charge beneficiaries a premium, pay providers more liberally than the original Medicare FFS program does, and allow physicians to charge their patients co-payments of up to 15%. Medical savings accounts are accounts into which Medicare beneficiaries can make tax-deductible contributions and out of which they can withdraw funds to purchase routine health-related goods (including medications) and services (including long-term-care insurance) from any Medicare provider. Linked to the MSA is a catastrophic insurance policy that limits the individual beneficiary’s expenses for health care to $6000 per year. Topic

45 NURSING-HOME CARE The Hypothetical Case, ContinuedThree months after Mrs Murat returns home, her husband suffers an MI and is no longer able to care for her at home Their daughter logs on to Nursing Home Compare (http://www.medicare.gov/NHcompare/home.asp) to shop for a nursing home The daughter arranges for her mother to enter a high- quality nursing home in her neighborhood, at least until her father recovers Nursing Home Compare (http://www.medicare.gov/NHcompare/home.asp) compares local facilities’ nurse-to-resident ratios, results of recent quality-of-care inspections, and rates of pressure ulcers and behavior problems. Topic

46 NURSING-HOME CARE The FFS Medicare program would pay 80% of the allowed charges submitted by Mrs Murat’s physician for visits to the nursing home The Murats would be responsible for the annual Medicare Part B deductible ($155) and the 20% co- insurance payments Medicare would not cover any of the nursing home’s per diem charges If Mrs Murat had joined the Medicare Advantage plan, one of the plan’s physicians would provide her primary care in the nursing home. Unless she was covered by Medicaid or a long-term-care policy, however, she and her husband would be responsible for the nursing home’s per diem charges for room, board, and other basic services, about $200 per day. After “spending down” their savings at this rate, the Murats might become sufficiently impoverished to qualify for Medicaid coverage, if they had not qualified previously. If the Murats owned their house, some states would put a lien on it in order to recover some of its payments to the nursing home when the house was eventually sold. Topic

47 HOSPICE CARE The Hypothetical Case, ContinuedMrs Murat suffers a massive stroke that leaves her physiologically stable, but in a persistent vegetative state She is unable to swallow thin liquids, and her husband says she would not want to be fed through any sort of tube Her physician says that, with oral feeding, she is likely to live for several weeks With the understanding that she will receive palliative care without life-prolonging interventions, her husband agrees to enroll her in a hospice program Topic

48 HOSPICE CARE If Mrs Murat had remained in the FFS Medicare program, Part B would pay her primary care physician 80% of the allowed charges for home or office visits and care plan oversight services Mr. Murat would be responsible for the 20% co- insurance and for small co-payment for outpatient prescription medications, and respite care FFS Medicare program (Part A) would pay a Medicare-certified hospice program a daily fee that would cover all care of Mrs Murat’s terminal diagnosis, including home care, medications, equipment, respite, counseling, and social services, even if she had enrolled in (and remained in) the Medicare Advantage plan. Topic

49 TRENDS IN MEDICARE ADVANTAGE PLAN ENROLLMENT, 2001–2010SOURCE: Kaiser Family Foundation. Medicare Advantage 2010 Data Spotlight. Publ No Published June Accessed June 23, 2010. Enrollment in private FFS MA plans fell as some companies left the market, but enrollment in coordinated care plans increased 43% between 2009 and 2010, particularly among local and regional PPOs. The broad geographical coverage and relatively low premiums of PPOs appear to have made them attractive to certain enrollees, such as moderate to higher income individuals who are facing increased Medigap premiums, and eroding employee-sponsored retiree coverage. The MA market is dominated by three major players at the national and local level, allowing them disproportionate influence over the MA market Enrollment in Special Needs Plans was relatively flat between 2009 and Of the 1.3 million enrollees each year, most were dually eligible for Medicare and Medicaid. Enrollees in MA plans paid 22% more in premiums in 2010 ($44/month vs $36/month) than in Premiums vary across plan types, reflecting strategic marketing decisions by companies such as emphasizing low premiums or extra benefits. Because of Medicare’s gaps and cost-sharing requirements, variation in MA plan benefits and cost-sharing can be substantially different among beneficiaries. Payments to MA plans will be phased down over time as a result of 2010 health reform legislation that intends to bring average payments closer to Medicare fee-for-service costs, reward high-quality plans, and protect beneficiaries. These changes will likely affect participation, enrollment, premiums, and extra benefits. 49

50 HEALTHCARE EMPLOYERS’ DATA INFORMATION SYSTEM (HEDIS)Requires Medicare Advantage plans to monitor and report their rates of compliance with selected processes and outcomes of health care Examples: mammography and immunization against influenza The Balanced Budget Act of 1997 (BBA 97) requires CMS to adjust capitation amounts according to enrollees’ risk of requiring expensive health care. This results in higher capitation payments for high-risk enrollees and lower payments for low-risk enrollees. This risk-adjustment method is based on the diagnoses associated with beneficiaries’ health care during a recent 12-month period. If a hospital or outpatient provider designates as a reason for providing a health care service a diagnosis included in CMS’s list of “selected significant disease” groups, CMS increases the amount of its capitation payment for that beneficiary during the following year. For example, if a beneficiary received care for heart failure during the 12 months from July 2008 to June 2009, CMS would adjust its capitation payments for the beneficiary during 2010 to provide the extra funds typically needed to care for people who have heart failure. In order to make this risk-adjustment system cost- neutral, CMS offsets the diagnosis-related increases in capitation payments by reducing its capitation payments for beneficiaries who have not received care for diagnoses in the selected significant disease groups during this 12-month period. CMS summarizes the information generated by all three systems and makes it available at the Medicare Personal Plan Finder to help older Americans make informed choices about Medicare’s FFS program and its various managed care options. Topic

51 BALANCED BUDGET REVISION ACT OF 1999Soon after enactment of the Balanced Budget Act of 1997, the quality of health care for older Americans began to erode, and decreases in the payments to providers proved to be steeper than projected For example, Medicare payments for home health care decreased by 45% between 1997 and 1999 The Balanced Budget Revision Act of 1999 restored some of the budget cuts made 2 years earlier, including $4.5 billion to Medicare Advantage plans Topic

52 MEDICARE MODERNIZATION ACTPart D program covering prescription medications Subsidies for employers who provide their retirees with insurance that covers prescription medications Eliminated Medicaid prescription medications coverage Competition between traditional FFS Medicare and Medicare Advantage plans Higher premiums for Medicare Part B to be paid by beneficiaries with higher incomes Expanded coverage for preventive services Increased reimbursement rates to physicians and hospitals in rural areas These are some of the dramatic changes in the nature and scope of the Medicare program that were part of the Medicare Modernization Act of 2003. Topic

53 THE FUTURE OF MEDICARE AND MEDICAIDCMS is conducting dozens of demonstration projects designed to improve the quality and outcomes of care for beneficiaries with chronic conditions In most projects, CMS pays contractors capitated monthly fees for providing case management or disease management services Many projects are based on the principle of “pay for performance”—CMS will pay capitation fees only to the extent that the contractor attains pre-agreed standards of performance One pay-for-performance program is the Physician Quality Reporting Initiative (PQRI). Physicians and other health practitioners who report data about the quality of their care when they submit their bills to their Medicare carriers may earn bonuses of up to 1.5% of their total Medicare payments. CMS also sends them personal reports comparing their PQRI data to those of peers nationwide. In 2008 there were 118 quality measures that could be reported, but some are specific to certain specialties. Additional information is available at Topic

54 SUMMARY (1 of 3) Medicare Part A: hospital, skilled nursing home, home-health and hospice services Medicare Part B: physicians, nurse practitioners, social workers, psychologists, therapists, laboratory tests, and durable medical equipment Medicare Part D: covers some of the cost of prescription medications Topic

55 SUMMARY (2 of 3) Medicare Part C provides the benefits offered under Medicare Parts A, B, and D through Medicare Advantage plans, which are managed care plans Medigap supplemental insurance plans cover Medicare Part A and Part B deductibles and co- insurance costs, as well as preventive care and other health-related goods and services Topic

56 SUMMARY (3 of 3) The Medicare Personal Plan Finder (http://www.medicare.gov/MPPF/home.asp) can assist patients in selecting a Medigap or Medicare Advantage plan and in comparing nursing facilities and home health agencies Medicaid is a joint federal and state program that provides supplemental health insurance (including long-term custodial care in nursing homes) to people of all ages who have low incomes and limited savings Topic

57 CASE 1 (1 of 5) An 82-year-old man comes to the office because he has had severe pain in his left knee for 6 weeks. He can no longer transfer independently. His history includes rheumatoid arthritis. He takes an NSAID, hydroxychloroquine, methotrexate, and folate at maximal dosages for his arthritis; an injection to the joint has given no relief. He is enrolled in traditional Medicare Parts A and B, and he has a stand-alone Part D policy through a private insurance company. Slide 57 Topic Slide 57

58 CASE 1 (2 of 5) The patient’s monthly premium for the Part D policy is $36, with an annual deductible of $295 (in 2009). His co-payment and co-insurance amounts vary by medication, and his policy includes a “doughnut hole” (coverage gap). His prescription medications currently cost him $180/month. His income is $2000/month from a pension in addition to Social Security. On examination, the left knee is swollen, warm, and exquisitely tender, with effusion. Topic

59 CASE 1 (3 of 5) Etanercept, an antitissue necrosis factor medication, offers the patient the best chance of improving function and avoiding nursing-home admission. He believes the price—$1100/month—to be prohibitive. Etanercept, like other medications in the same class, is not available in a generic preparation. Slide 59 Topic Slide 59

60 CASE 1 (4 of 5) Which of the following is accurate about this patient?He can enroll in hospice care, which offers complete Medicare coverage of all medications. He can enroll in Medicaid, which offers additional medication coverage. Some private plans provide payment within the coverage gap, which would likely reduce his total out- of-pocket expenses. Substituting generic preparations for his other medications would reduce costs and avoid the coverage gap. Coverage of medication costs resumes once expenses exceed the upper limit of the coverage gap. Slide 60 Topic Slide 60

61 CASE 1 (5 of 5) Which of the following is accurate about this patient?He can enroll in hospice care, which offers complete Medicare coverage of all medications. He can enroll in Medicaid, which offers additional medication coverage. Some private plans provide payment within the coverage gap, which would likely reduce his total out- of-pocket expenses. Substituting generic preparations for his other medications would reduce costs and avoid the coverage gap. Coverage of medication costs resumes once expenses exceed the upper limit of the coverage gap. ANSWER: E This patient has exhausted less expensive treatments for rheumatoid arthritis and now faces the prospect of financing more expensive treatment. His total medication costs will increase to about $15,000 per year. The vast majority of this will be covered by his current Part D plan: Once the “doughnut hole” is exceeded (corresponding to roughly $4,350 in total annual out-of-pocket expenses in 2009, which the patient may be able to afford), Medicare Part D covers 95% of additional drug costs. Many patients misunderstand the coverage gap and mistakenly believe that once a patient has reached it, all Medicare benefits are lost. Indeed, the new medicine would propel his medication costs through the coverage gap and beyond. The history does not suggest that this patient has ≤6 months to live, and therefore hospice care is inappropriate. His income is likely too high to qualify for medical assistance, so switching to Medicaid is not possible until his medical costs exceed his state’s income and asset limits. Changing Part D plans is an option, but he would have to wait until the next enrollment period. In addition, if he chose a Part D plan with doughnut-hole coverage, he would have much higher premiums, and total out-of-pocket costs would likely be similar. In addition, the few Part D plans with doughnut-hole coverage usually provide generic drug coverage only. Substituting generic preparations for as many of his medications as possible may lower his total medication costs, but the cost of the etanercept will far overwhelm reductions through generic prescribing. Topic

62 CASE 2 (1 of 3) An 80-year-old man comes to the office for a routine visit. He is enrolled in traditional fee-for-service Medicare Parts A and B, and he has a Part D policy. He has seen advertisements for an insurance plan called SeniorGold, which is described as a Medicare Advantage organization with a Medicare contract. He wishes to discuss advantages and disadvantages of switching his insurance coverage to this plan. Topic

63 CASE 2 (2 of 3) Which of the following is most likely to occur if he switches insurance coverage to SeniorGold? He would lose some Part A benefits. He would lose some Part B benefits. He would have to drop Part D prescription drug coverage. He would not get coverage for vision examination and eyeglasses. He would not be allowed to choose his physicians. Slide 63 Topic Slide 63

64 CASE 2 (3 of 3) Which of the following is most likely to occur if he switches insurance coverage to SeniorGold? He would lose some Part A benefits. He would lose some Part B benefits. He would have to drop Part D prescription drug coverage. He would not get coverage for vision examination and eyeglasses. He would not be allowed to choose his physicians. ANSWER: E A potential disadvantage of a Medicare Advantage plan is that the provider network may be restricted, because this is a key strategy for controlling costs in managed-care systems. Medicare Advantage plans are required by law to provide all services covered in traditional Medicare Parts A and B. Participants may enroll in a Medicare Advantage plan and have a separate, stand-alone Part D policy, or attach a Part D policy to the Medicare Advantage plan. Traditional Medicare does not cover vision examination and eyeglasses; many Medicare Advantage plans cover such services as an enticement to get patients to enroll. Topic

65 CASE 3 (1 of 3) A 72-year-old man is hospitalized for 7 days because he had a large, left-hemisphere stroke, and he is then admitted to a rehabilitation unit for 30 days. His neurologic improvement is minimal, and he is admitted to a nursing home for long-term care. He has health insurance coverage only through Medicare Parts A, B, and D. He has $50,000 in savings and owns a modest home. Topic

66 CASE 3 (2 of 3) Which of the following will be the chief source of funding for his first year in the nursing home? Medicare Part A Medicare Part B Medicare Part D Medicaid Out-of-pocket payment Slide 66 Topic Slide 66

67 CASE 3 (3 of 3) Which of the following will be the chief source of funding for his first year in the nursing home? Medicare Part A Medicare Part B Medicare Part D Medicaid Out-of-pocket payment ANSWER: E Long-term care is primarily funded by out-of-pocket payment and Medicaid. After hospital discharge, Medicare Part A provides full coverage for the first 20 days, and modest coverage ($128/day in 2008) for days 21 through 100 of a nursing-home admission, provided that the patient requires nursing care. Medicare does not pay for custodial long-term care. Thus, unless a patient has long-term care insurance, he or she pays out-of-pocket for nursing-home care. As is true of many older Americans, this patient does not have long-term care insurance. Because he has some savings, he is required to first “spend down” to a minimal level of worth (which varies state to state) before he qualifies for Medicaid. After a patient has spent down and enrolled in Medicaid, Medicaid becomes the chief source of long-term care financing. Topic

68 Copyright © 2010 American Geriatrics SocietyACKNOWLEDGMENTS Editor: Annette Medina-Walpole, MD GRS7 Chapter Authors: Chad Boult, MD, MPH, MBA Richard G. Stefanacci, DO, MGH, MBA, AGSF, CMD GRS7 Question Writer: James T. Pacala, MD, MS Pharmacotherapy Editor: Judith L. Beizer, PharmD Medical Writers: Beverly A. Caley Faith Reidenbach Managing Editor: Andrea N. Sherman, MS Copyright © 2010 American Geriatrics Society Topic